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Coming up, what didn’t get Academy Awards nominations this week. But, first, in California Governor Gray Davis has announced his plan to divert the possible bankruptcy of utilities in his state. Mr. Davis proposes that California buy the transmission lines from the utilities. The governor says he believes the purchase can be accomplished without raising consumer rates. But this plan has come under fire from consumer groups, Republican lawmakers and at least one of the utilities. NPR’s Richard Gonzales reports.


Governor Davis had been under pressure from Democratic lawmakers to adopt a plan that will keep power flowing into this state and keep the cash-strapped utilities solvent. The utilities say they have a debt of more than $ 12 billion. So Davis is proposing that California buy one of the utilities’ key assets: their transmission lines.

Governor GRAY DAVIS :

The proposal I’m making today is a balanced business transaction. It provides real value to ratepayers while allowing utilities to go back in business and keep the lights on.

GONZALES: Davis didn’t say how much the transmission lines would cost California. The book value is placed at $ 3.1 billion. But he acknowledged that the actual sale price, which has yet to be negotiated, will probably amount to much more than the $ 3.1 billion. Davis hopes that with the proceeds from the sale of the transmission lines the utilities will be able to restructure their debt and pay off the out-of-state power generators, who are owed several billion dollars.

Gov. DAVIS: So it is my hope that the proposal today will avoid the need for bankruptcy, provide some assurance to the customers, creditors and generators that they’ll be receiving payments and allow us to go forward without the fear that everything will collapse. So that’s–I hope and believe that this takes bankruptcy off the table.

GONZALES: Republican lawmakers are cool to the idea of the state buying the transmission lines. Assembly Minority Leader Bill Campbell says the transmission lines might be a white elephant that may cost an extra billion dollars to upgrade and maintain.

Assemblyman BILL CAMPBELL (Republican, California): That billion dollars is going to come from somewhere. Is it improving our schools? Is it improving our roads? Is it cleaning up our parks and waterways? It’s coming from something.

GONZALES: The Republicans suspect the utilities have overstated their debt. While the utilities say it’s more than $ 12 billion, some financial experts say it’s only half of that. Regardless of how much the utilities owe, Governor Davis believes the debt can be retired with revenue bonds secured by a dedicated rate charge that is already built into consumers’ bills. Consumer groups agree the state should buy the transmission lines, but they say ratepayers shouldn’t have to pay any of the utilities’ debt. Doug Heller is a spokesman for The Foundation for Taxpayer & Consumer Rights.

Mr. DOUG HELLER (Foundation for Taxpayer and Consumer Rights): The fact is a transmission system is good for the state, but not at any price; not at twice book value. These companies are–you know, if they’re in a desperate situation and they’re walking into a pawn shop, they’re going to get whatever price we offer them. What we should do is offer a price that’s fair for the public.

GONZALES: Heller says Davis’ proposal amounts to a bailout for the utilities. But at least one utility disputes that. In a statement the Pacific Gas and Electric Corporation said that it is not looking for a bailout, and that PG&E doesn’t believe the governor’s plan is fair to their shareholders or ratepayers.

Consumer Watchdog
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